FirstGroup looks set to run the Great Western mainline until the next decade without facing a franchise competition – having earlier handed back its contract to avoid hundreds of millions of pounds in premium payments to the government.

The government is planning to award further rights to the service to the transport firm. Last September it sparked outrage by awarding first a six-month extension and then a two-year direct award to First for rail services west of London for an annual sum of £32m – a fraction of the £800m due under the terms of the original franchise.

The west coast debacle in 2012 saw franchising thrown into disarray, but the terms of direct awards and extensions since agreed by the Department for Transport have been questioned by Labour.

In a parliamentary answer the transport minister, Stephen Hammond, confirmed that from September 2015 the franchise was planned to be covered by a second direct award to First.

This may run until 2020 with a proposed extension.

The shadow transport secretary, Mary Creagh, said the deals would leave a £300m hole in the DfT's finances.

She said: "Ministers have now quietly announced another sweetheart deal with First Great Western Group, no doubt at rock-bottom prices, in stark contrast to their unwanted refranchising of the east coast line, run by a not-for-profit public operator which last year returned £191m to taxpayers."

A spokesman for First said: "The DfT has always stated that any decision on the future of the franchise would be based on delivering the best value for customers and taxpayers beyond September 2015.

Given the significant number of investment projects currently under way, and due to be completed over the next six years on the Great Western network, a directly awarded franchise covering the entire period of upgrades may create better overall value."

Only three firms are believed to have bid for the east coast line. On the Great Western line new trains will be introduced, along with electrification works and major station redevelopments over the next seven years.